# Baseball ROI

Author: KaiserPublished: Aug 31, 2005 at 5:52 am 5 comments

David Leonhardt re-opened the debate about whether high-spending baseball teams (like the Yankees) are winners or losers.  According to his application of an idea from Doug Pappas, George surely fools his investors!  Accompanying his article was a table of numbers, of which I clipped the top third:

As tables go, this one is fundamentally sound, teams sorted by "cost per victory" which was the point David wanted to make.

If some readers find this table hard to swallow, they probably have wandered off, trying to make sense of the payroll and winning percentage columns; or perhaps they got dizzy trying to get their heads around 1,133,807 versus 1,225,575.  Precision is a great scientific virtue but rarely makes a good graphic guideline.

This set of data, essentially a bi-variate series, gives me yet another opportunity to discuss the versatile scatter plot.  Here is the basic design, with winning % on the y-axis and payroll on the x-axis.  Contrary to the article's conclusion, there appears to be a general association between payroll and winningness.  The dotted lines are median payroll (US\$ 63 million) and median winning % (0.500) respectively so that half the teams fall on either side of each line.  I have removed the Yankees since its spending far outstripped every other team (will return to them later).

We can take this design a step further by standardizing both variables: in the new graph, the scales are in units of standard deviations (s.d.) so that 0 is the mean payroll and +1 is payroll that is one s.d. above the mean and so on.  Observe that the Yankees payroll of US\$ 206 million is four s.d. above the mean payroll.

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## Article tags

• ### 1 - Matthew T. Sussman

Aug 31, 2005 at 8:19 am

The data would probably be better correlated if taken over a larger period of time.

Sure, the Indians are getting the best deal per win now, but in 2 years if they keep all those players, how much will their salary be?

(BTW, Moneyball is in my suitcase. It's the next book for me to read when I'm on the road.)

Aug 31, 2005 at 8:44 am

I need to read "Moneyball." Of course, I am waiting for the A's to get out of the first round before I knight Billy Beane as keeper of the sacred flame of baseball.

Walking your way to wins works against the Royals and the Tigers. It's a different story when you have to face real major league pitchers in October. Or is it? Interesting discussion going on in baseball these days.

• ### 3 - Tan The Man

Aug 31, 2005 at 6:28 pm

The problem with using "money" as an indicator of talent/skill is that many players are overrated and overpaid.

• ### 4 - Bob A. Booey

Aug 31, 2005 at 6:43 pm

This is smart and geeky, but rather obvious.

OF COURSE payroll is associated with winning. That's the point of "Moneyball," that Billy Beane is so smart that he wins despite the odds stacked against him. The first chapter of that book details various meetings involving MLB execs and owners where they've presented the case for an absolute rich-poor competitive imbalance.

But that doesn't mean there aren't teams who spend lots and don't win. The Mets have been in that category the last couple of years and the Yankees may also miss the playoffs this year.
The Dodgers are a good example this year.

That is all.

• ### 5 - Anthony Grande

Aug 31, 2005 at 6:52 pm

Its coming to me, I can see the future, METS 2005 WORLD CHAMPIONS

Personal attacks are NOT allowed.

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